Tag: 2023 News

United Behavioral Health (“UBH”) is one of the nation’s largest managed healthcare organizations. It administers insurance benefits for mental health conditions and substance use disorders for various commercial health benefit plans. In this role, UBH processes coverage requests made by plan members to determine whether the treatment sought is covered under the respective plans. UBH retains discretion to make these coverage determinations “for specific treatment for specific members based on the coverage terms of the member’s plan.”

ERISA is a federal statute designed to regulate “employee benefit plan[s].” 29 U.S.C. § 1003(a). Congress enacted ERISA “to promote the interests of employees and their beneficiaries in employee benefit plans,” 29 U.S.C. § 1132(a) sets forth a comprehensive civil enforcement scheme.

The named Plaintiffs in this class action are all beneficiaries of ERISA-governed health benefit plans for which UBH was the claims administrator. Plaintiffs all submitted coverage requests, which UBH denied. Among the individually named Plaintiffs, there are ten different ERISA plans. Among the class members, there may be as many as 3,000 different plans. The Parties stipulated to a sample class of 106 members, from which they submitted a sample of health insurance plans.

Plaintiffs alleged that the Plans required, as a condition of coverage, that treatment be consistent with generally accepted standards of care (“GASC”) or were governed by state laws specifying certain criteria for making coverage or medical necessity determinations.

UBH employed two different processes to determine whether a requested service was covered. First, where the requested service was subject to a Plan exclusion, UBH issued an administrative denial. Administrative denials did not involve clinical reviews and are not at issue in this appeal. Second, for those claims not administratively denied, UBH conducted a clinical review, by which UBH Peer Reviewers made clinical coverage determinations.

To assist with these clinical coverage determinations, UBH developed internal guidelines used by UBH’s clinicians. The Guidelines applied across Plans and were not customized based on specific plan terms. For this reason, among others, Plaintiffs argue that the Guidelines implemented only the plan exclusion for coverage inconsistent with GASC, which appeared in all plans.

UBH issued new Level of Care Guidelines each year, which contained several parts, some of which Plaintiffs challenge tas more restrictive than GASC,.

The district court entered judgment in Plaintiffs’ favor, concluding that UBH breached its fiduciary duties and wrongfully denied benefits because the Guidelines impermissibly deviated from GASC and state-mandated criteria. The district court also found that financial incentives infected UBH’s Guideline development process, particularly where the Guidelines “were riddled with requirements that provided for narrower coverage than is consistent with” GASC.

Based on these findings, the district court concluded that UBH breached its fiduciary duty to comply with Plan terms and breached its duties of loyalty and care “by adopting Guidelines that are unreasonable and do not reflect” GASC. It also held that UBH improperly denied Plaintiffs benefits by relying on its restrictive Guidelines that were inconsistent with the Plan terms and state law.

The district court issued declaratory and injunctive relief, directed the implementation of court-determined claims processing guidelines, ordered “reprocessing” of all class members’ claims in accordance with the new guidelines, and appointed a special master to oversee compliance for ten years.

UBH appealed and argued that Plaintiffs lacked Article III standing to bring their claims because: (1) Plaintiffs did not suffer concrete injuries; and (2) Plaintiffs did not show proof of benefits denied, and so they cannot show any damages traceable to UBH’s Guidelines. The 9th Circuit disagreed with this argument in the published case of Wit v United Behavioral Health -20-17363 (Aug 2023). However it did find error in other aspects of the trial court orders, and reversed in part.

To establish standing under Article III, a plaintiff must show (i) that he suffered an injury in fact that is concrete, particularized, and actual or imminent; (ii) that the injury was likely caused by the defendant; and (iii) that the injury would likely be redressed by judicial relief. The 9th Circuit ruled that Plaintiffs met all three criteria.

UBH also appealed from the district court’s class certification order. The district court’s class certification decision was reviewed for an abuse of discretion. As to Plaintiffs’ denial of benefits claim, the 9th Circuit agreed, and concluded that the district court erred in granting class certification here based on its determination that the class members were entitled to have their claims reprocessed regardless of the individual circumstances at issue in their claims. It ordered remand for claim reprocessing where a plaintiff has shown that his or her claim was denied based on the wrong standard and that he or she might be entitled to benefits under the proper standard.

UBH further argues that the district court erred by concluding that the Guidelines improperly deviated from GASC, and by failing to apply an appropriate level of deference to UBH’s interpretation of the Plans. It was undisputed that the Plans in this case confer UBH with discretionary authority to interpret the Plan terms.  But where “an administrator has a dual role as plan administrator and plan insurer, there is a structural conflict of interest .”

However, the district court’s findings did not excuse it from applying the abuse of discretion standard. “Abuse of discretion review applies to a discretion-granting plan even if the administrator has a conflict of interest.” In short, while the Plans mandated that a treatment be consistent with GASC, they did not compel UBH to cover all treatment that was consistent with GASC.

Thus the 9th Circuit reversed the district court’s judgment that UBH wrongfully denied benefits to the named Plaintiffs to the extent the district court concluded the Plans require coverage for all care consistent with GASC.

The Department of Justice just announced deferred prosecution agreements resolving criminal antitrust charges against Teva Pharmaceuticals USA, Inc. and Glenmark Pharmaceuticals Inc., USA. As part of those agreements, both companies will divest a key business line involved in the misconduct, and as an additional remedial measure,

Teva will make a $50 million drug donation to humanitarian organizations. Teva will pay a $225 million criminal penalty – the largest to date for a domestic antitrust cartel – and Glenmark will pay a $30 million criminal penalty. Both companies will face prosecution if they violate the terms of the agreements, and if convicted, would likely face mandatory debarment from federal health care programs.

The agreements each require the companies to undertake remedial measures, including the timely divestiture of their respective drug lines for pravastatin, a widely used cholesterol medicine that was a core part of the companies’ price-fixing conspiracy. This extraordinary remedy forces the companies to divest a business line that was central to the misconduct.

Teva must also donate $50 million worth of clotrimazole and tobramycin, two additional drugs with prices affected by Teva’s criminal schemes, to humanitarian organizations that provide medication to Americans in need.

Both Teva and Glenmark have agreed, among other things, to cooperate with the department in the ongoing criminal investigations and resulting prosecutions, report to the department on their compliance programs, and modify those compliance programs where necessary and appropriate.

As part of the agreements, Teva admitted to participating in three antitrust conspiracies that affected essential medicines – including pravastatin, clotrimazole and tobramycin – and Glenmark admitted to participating in a conspiracy to fix the price of pravastatin. Pravastatin is a commonly prescribed cholesterol medication that lowers the risk of heart disease and stroke; clotrimazole is commonly prescribed to treat skin infections; and tobramycin is commonly prescribed to treat eye infections and cystic fibrosis.

Also as part of the agreements, the parties filed joint motions, which are subject to approval by the Court, to defer prosecution and trial on the filed charges for the three-year terms of the agreements or until after the criminal penalties are paid, whichever occurs later.

During the multi-year investigation, the Antitrust Division and its law enforcement partners uncovered price-fixing, bid-rigging and market-allocation schemes affecting many generic medicines, and charged seven generic pharmaceutical companies for their participation in the schemes. With these newest agreements, all seven companies have resolved their criminal charges and collectively agreed to pay more than $681 million in criminal penalties.

In June 2020, Glenmark was charged with one count of price fixing for its role in a conspiracy affecting the prices of pravastatin and other generic drugs. A grand jury returned a superseding indictment against Glenmark and Teva in August 2020 for the same and similar conduct. Count one alleged that Teva conspired with Glenmark, Apotex Corp. and others to increase prices for pravastatin and other generic drugs. Apotex admitted its role in this conspiracy and agreed to pay a $24.1 million penalty in May 2020.

Count two charged Teva for its role in a conspiracy with Taro Pharmaceuticals U.S.A. Inc., its former executive Ara Aprahamian and others to increase prices, rig bids and allocate customers of generic drugs, including clotrimazole, a medicine used to treat skin infections. Taro admitted to its role in this conspiracy and agreed to pay a $205.7 million penalty to resolve that charge in July 2020. Aprahamian was indicted in February 2020 and is awaiting trial.

Count three charged Teva for its role in a conspiracy with Sandoz Inc. and others to increase prices, rig bids and allocate customers of generic medicines, including cystic fibrosis medicine tobramycin. A former Sandoz executive pleaded guilty for his participation in the conspiracy in February 2020. Sandoz admitted to its role in the conspiracy and agreed to pay a $195 million penalty in March 2020.

Kristina Raines and Darrick Figg, on behalf of themselves and a putative class, allege that they received offers of employment that were conditioned on successful completion of preemployment medical screenings to be conducted by defendant U.S. Healthworks Medical Group (USHW), who was acting as an agent of plaintiffs’ prospective employers.

Raines received an offer from Front Porch Communities and Services (Front Porch) for a position as a food service aide, but the offer was conditioned on her passing the preemployment medical screening conducted by USHW. Raines alleges that she responded to most of the questions on the written questionnaire, but she declined to answer the question about the date of her last menstrual period. She alleges that the exam was then terminated, and Front Porch revoked its offer of employment.

Figg received an offer from the San Ramon Valley Fire Protection District to serve as a member of the volunteer communication reserve, but his offer, too, was conditioned on his passing the preemployment medical screening conducted by USHW. Figg alleges that he answered all the questions, successfully passed the screening, and was hired for the position.

Raines filed a state court action against Front Porch and USHW which the defendants removed to federal court. A second amended complaint added Figg as a named defendant, and dismissing Front Porch as a defendant (pursuant to a settlement) and adding other defendants. The third amended complaint, which is the operative complaint, alleges claims under the FEHA, the Unruh Civil Rights Act (Civ. Code, § 51 et seq.), unfair competition law (Bus. & Prof. Code, § 17200 et seq.), and the common law right of privacy.

The named defendants were ultimately U.S. Healthworks Medical Group, a corporation; Select Medical Holdings Corporation, a corporation; Concentra Group Holdings LLC, a corporation; U.S. Healthworks, Inc., a corporation; Select Medical Corporation, a corporation; Concentra, Inc., a corporation; Concentra Primary Care of California, a medical corporation; and Occupational Health Centers of California, a medical corporation.

Defendants moved to dismiss, and the district court granted the motion with prejudice as to all claims except plaintiffs’ unfair competition law claim. In dismissing plaintiffs’ FEHA claim, the district court concluded that the FEHA does not impose liability on the agents of a plaintiff’s employer. As to plaintiffs’ unfair competition law claim, the district court had granted dismissal without prejudice, but plaintiffs requested an order dismissing the claim with prejudice, and the district court granted their request.

Plaintiffs then appealed the dismissal of their other claims. After holding oral argument, the United States Court of Appeals for the Ninth Circuit asked the California Supreme Court to answer the question “Does California’s Fair Employment and Housing Act, which defines ‘employer’ to include ‘any person acting as an agent of an employer,’ Cal. Gov’t Code § 12926(d), permit a business entity acting as an agent of an employer to be held directly liable for employment discrimination?” (Raines v. U.S. Healthworks Medical Group (9th Cir. 2022) 28 F.4th 968, 969.)

The California Supreme Court concluded that “an employer’s business entity agents can be held directly liable under the FEHA for employment discrimination in appropriate circumstances when the business-entity agent has at least five employees and carries out FEHA-regulated activities on behalf of an employer.” in the case of Raines v. U.S. Healthworks Medical Group -S273630 (August 2023).

Section 12940 of the FEHA makes it an “unlawful employment practice” for “any employer” “to make any medical or psychological inquiry of an applicant” (§ 12940, subd. (e)(1)), and section 12926, subdivision (d) states that, for purposes of the FEHA, the term ” ‘[e]mployer’ includes any person regularly employing five or more persons, or any person acting as an agent of an employer, directly or indirectly . . . .”

“The most natural reading of this language is that a ‘person acting as an agent of an employer’ is itself an employer for purposes of the FEHA. Indeed, this interpretation accounts for and reasonably construes the word ‘includes’ (§ 12926, subd. (d)), a word that, in this context, can only be intended to broaden the scope of the term ’employer.’ ”

And they went on to say “Of significance to our analysis, the FEPA’s 1959 definition of employer took its agent-inclusive language from the National Labor Relations Act (NLRA) (29 U.S.C. § 151 et seq.), a federal law that assures fair labor practices and workplace democracy. At that time, and still today, the NLRA provided that ‘[t]he term ‘employer’ includes any person acting as an agent of an employer, directly or indirectly.’ ”

The California Supreme court therefore concluded that the “legislative intent leads us to conclude that the agent-inclusive language of section 12926, subdivision (d) permits a business-entity agent of an employer to be held directly liable for violation of the FEHA when it carries out FEHA-regulated activities on behalf of an employer.”

Blue Shield of California announced a new pharmacy care model that is designed to fix problems in what it calls “today’s broken prescription drug system.” The nonprofit health plan is transforming how medications are purchased and supplied to its 4.8 million members by selecting organizations that share Blue Shield’s vision for more affordable and transparent pharmacy services.

Today’s announcement is a major milestone in Blue Shield’s Pharmacy Care Reimagined initiative, which will help provide its members with convenient, transparent access to medications while lowering costs. Once Blue Shield’s multi-year strategy is fully implemented, the health plan expects to save up to $500 million in annual drug costs.

Most American adults take at least one prescription drug annually, with more than a third of adults taking at least three medications per year. Already a significant cost, total prescription drug spend in the United States is consistently rising. In 2021, the American healthcare system spent more than $600 billion on prescription drugs – about $1,500 per person, per year.

The current pharmacy care system rewards some stakeholders for selling more drugs at higher costs. Blue Shield is seeking to transform the system into a value-based model that provides members with the medications they need at a more affordable cost.

“The current pharmacy system is extremely expensive, enormously complex, completely opaque, and designed to maximize the profit of participants instead of the quality, convenience and cost-effectiveness for consumers,” said Paul Markovich, president and CEO of Blue Shield of California. “That is why we are working with like-minded partners to create a completely new, more transparent system that gets the right drugs to the right people at the right time at a substantially lower cost.”

In today’s current pharmacy supply chain, there can be up to a dozen companies involved in the process from when a drug is made to when a member receives it. Some can add complexity and cost without adding value or providing transparency into the rationale for their pricing. To simplify the system and cut unnecessary costs, Blue Shield has selected five companies with like-minded philosophical and technology standards to build a new, innovative model following regulatory approval. Together, Blue Shield will offer an integrated, coordinated, and holistic pharmacy experience to its members.

– – Amazon Pharmacy will provide fast and free delivery of prescription medications, complete with status updates, as well as upfront pricing and 24/7 access to pharmacists.
– – Mark Cuban Cost Plus Drug Company will establish a simple, transparent, and more affordable pricing model, reducing surprise drug costs at the pharmacy pick-up counter.
– – Abarca will pay prescription drug claims quickly and accurately while continuing to evolve its technology platform, Darwin, to support new, simplified payment models.
– – Prime Therapeutics will work with Blue Shield to negotiate savings with drug manufacturers to move toward a value-based model that aligns drug prices to patient efficacy and health outcomes.
– – CVS Caremark will provide specialty pharmacy services for members with complex conditions, including education and high-touch patient support.

“Amazon Pharmacy is thrilled to join Blue Shield of California in their effort to help members get the medications they need, when they need them, at a price they can afford,” said John Love, vice president of Amazon Pharmacy. “With the help of Amazon’s upfront pricing, on-time delivery, and round-the-clock access to clinical care, we can provide a customer-centric pharmacy experience that supports better health outcomes.”

“Our company was built on a commitment to deliver transparent and affordable prescription drugs to everyone, and we are excited to collaborate with Blue Shield of California to change this part of the healthcare system in such an impactful and meaningful way,” said Alex Oshmyansky, founder and CEO of Mark Cuban Cost Plus Drug Company. “We hope others will follow in the effort to fix this convoluted and inefficient prescription drug supply chain.”

Juan Lopez claimed injury to his cervical, thoracic, and lumbar spine, to his shoulders and arms, to his heart and lungs, and in the form of hypertension, HIV, and GERD , while employed by Barrett Business Services as a laborer during the period from December 23, 2009, through December 23, 2010 (ADJ7745966). He also claimed injury to his heart and blood system, and in the form of HIV and GERD while employed by the same Barrett on September 13, 2010 (ADJ7909061).

By December 2014, the case had already been remanded by the Board on the issue of AOE/COE and assigned to a new WCJ after the prior WCJ had retired. The on-going litigation of this matter from December 2014 to the present included a number of additional times when the matter was continued or ordered off calendar for development of the record. The the case was submitted and the new WCJ issued an Opinion, and a Petition for Reconsideration was denied.

At an MSC in September 2016 the defendant asked that the case be set for trial on all issues, and applicant asked for a continuance, which was granted, and at the next MSC in November 2016 defendant asked that discovery be closed and the case set for trial, but the WCJ to the matter off calendar for a PQME appointment.

After a DOR was filed, a trial scheduled for February 6, 2018, but the applicant did not appear, and the case was continued. On April 24, 2018, the parties appeared, the matter was pending submission to allow post-trial briefs and submitted on May 14, 2018.

On June 15, 2018, the WCJ vacated submission in part because the internal PQME deferred to an expert in infectious disease. At the second status conference after the submission was vacated the court issued an order for a panel qualified medical examiner in Infectious Disease. On February 7, 2019, the parties appeared for a status conference and no PQME panel had been issued because applicant’s hearing representative “guessed” his office did not send the paperwork. The court continued the status conference.

At the next status conference on May 2, 2019, the parties agreed to submit on the existing record. but the WCJ found that the record needed further development, At a continued MSC on August 19, 2021, the parties supplemented the existing record with the report of Dr. Vyas and the matter was submitted. On October 6, 2021, the court realizing the report submitted was not the internal medicine report the court had been waiting for and vacated the submission.

Finally on May 10, 2023, the matter was tried and submitted. On May 22, 2023, the WCJ issued a Finding and Award which found applicant failed to meet his burden to show industrial injury on the disputed body parts.

Applicant filed a Petition for Reconsideration in case number ADJ7745966, where the WCJ found that applicant did not sustain injury AOE/COE to his lungs or in the form of HIV (human immunodeficiency virus). And in case number ADJ7909061wherein the WCJ found that applicant did not sustain injury AOE/COE, to his heart and blood system nor in the form of HIV or GERD. Applicant contends the record should be further developed regarding applicant’s HIV injury claim.

Reconsideration was denied in the panel decision of Lopez v Barrett Business Services -ADJ7909061-ADJ7745966 (August 2023).

The WCJ and the Appeals Board have a duty to further develop the record where there is insufficient evidence on an issue. (McClune v. Workers’ Comp. Appeals Bd. (1998) 62 Cal.App.4th 1117, 1121-1122 [63 Cal.Comp.Cases 261]; see also Tyler v. Workers’ Comp. Appeals Bd. (1997) 56 Cal.App.4th 389, 394 [62 Cal.Comp.Cases 924].)

However, if a party fails to meet its burden of proof by obtaining and introducing competent evidence, it is not the job of the Appeals Board to rescue that party by ordering the record to be developed. (Lab. Code, § 5502; San Bernardino Community Hospital v. Workers’ Comp. Appeals Bd. (McKernan) (1999) 74 Cal.App.4th 928 [64 Cal.Comp.Cases 986]; Telles Transport Inc. v. Workers’ Comp. Appeals Bd. (2001) 92 Cal.App.4th 1159 [66 Cal.Comp.Cases 1290].)

The duty to develop the record must be balanced with the parties’ obligation to exercise due diligence to complete necessary discovery. (San Bernardino Community Hosp. v. Workers’ Comp. Appeals Bd. (McKernan), supra.)

“In this case, the parties have submitted the case for decision three times and the WCJ has vacated submission three times.The medical record has not been developed as directed by the WCJ despite ample opportunity to do so.“

“Our review of the entire record (for the period from January 2011, to the present) clearly indicates that applicant was repeatedly given the opportunity to develop the record in support of his injury claims. As noted above, it is not our responsibility to rescue a party by ordering the record to be developed when that party has previously been provided ample opportunity to further develop the record.”

“Thus, applicant has not shown good cause, under the circumstances of this matter, to yet again, delay final resolution of applicant’s injury claims through further development of the record. Therefore, we will not disturb the WCJ’s F&A.”